China to Radically Readjust Economic Policy

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BEIJING, July 15 – The Chinese government is preparing to apply major readjustments to its financial policies to re-balance the domestic economy. Concerns over the country’s economy and the development of an over-reliance on exports have prompted a meeting of the politburo in the next two weeks as policymakers voice their concerns that despite encouraging figures for 2009, the Chinese economy still has underlying flaws.

The agenda will focus on the development of domestic consumption, which has remained sluggish despite the injection of billions of dollars worth of stimulus packages this year. Structural reform to lessen the income gap between the wealthy east coast and the rest of China, now a priority following riots and criticism of exploitation of resources in Xinjiang, are also high on the list of priorities.

Preparations for the meeting are already been underway and senior members of the politburo have already traveled through China’s provinces and autonomous regions to generate intelligence. The readjustment is likely to produce a clearer path for reform towards a more sustainable economic model based more on domestic consumption and away from capital investment. Concerns abound that currently China’s apparent recovery is only due to the RMB4 trillion the government injected into the economy earlier in the year, thus distorting the true position of the nation’s financial security. Restructuring the domestic economy will be a major theme for the second half of the year as China tries to stimulate demand and lift itself back towards its intended aims of 8 percent annual growth, a figure unlikely to be met this year.